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Cape Town – The rand held firm after strengthening to R12.24/$ in the previous session on rumours that President Jacob Zuma has been given an ultimatum to step down.
By 11:31 on Friday the unit was trading at R12.31 to the US dollar, but stayed within a narrow range of R12.28 - R12.35.
On Thursday the rand traded within a range between R12.24 and R12.40 to the greenback, helped by upbeat Chinese service sector activity data for December as well as dollar weakness, according to a report from NKC African Economics.
Zuma’s rumoured deadline
“The rand managed to pull back on rumours that President Zuma has been given an ultimatum to step down but apparently he is refusing to accept the conditions,” Philip Pearce, dealer at TreasuryOne said in a market update.
“It may be a quiet start to 2018 but from next week, when Cyril Ramaphosa addresses the ANC for anniversary celebrations, things are going to heat up,” he said.
Quoting a report in The Star, NKC said Zuma was given a deadline to step down as president, and there is possibly another motion of no confidence in the works if he does not voluntarily leave before the next meeting between the ANC top six on Wednesday.
The meeting will be the first since Cyril Ramaphosa was elected as the party’s new leader in December. Concerns are that Zuma’s continued presidency will create two centres of power within the party.
“A vote of no confidence would therefore give Ramaphosa’s supporters the opportunity to test their strength in the NEC (national executive committee), as Zuma is seen to be at a low point following the Constitutional Court ruling and Nkosazana Dlamini Zuma’s loss to Ramaphosa,” NKC said.
MMI economist Sanisha Packirisamy previously said that the two centres of power could disrupt policy and economic progress, but an early recall of Zuma may be viewed positively by markets.
Other factors which could boost the rand’s trade include the release of eurozone inflation data for December and US non-farm payroll data. A strong euro number might help the rand, said Adam Phillips, treasury specialist at Umkhulu Consulting.
The rand could breach the R12.23/$ mark once more news comes from the ANC next week, added Phillips.
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